As I described in the previous post, profiting from short-selling in biotech requires the identification of companies likely to fail clinically or commercially (or both!). Today we saw two very fine examples of that: Cell Genesys and Amylin.
Cell Genesys took a solid thumping today, dropping 72% after it halted its GVAX trial in prostate cancer due to 20 more deaths (67 vs. 47) in the GVAX arm of the trial. Now, CEGE was hard to short before this, considering its shares were still under $3, but put options are also available. Why was CEGE a good short? Simple…Cancer vaccines don’t work. Favrille? Whoops. Dendreon? Ditto. Same with Oxford Biomedica. Decades of failure? Check. Now it’s possible that some company like CEGE will come around and figure it out, but why fight the odds? Just short ‘em.
Turning to Amylin. This is a rarer beast, the biotech commercial failure, but commercial failure it is. While the latest news is about a half-dozen deaths relating to Byetta’s use, the fact is that this stock had been sliced in half since the end of last year due to repeated disappointments on the sales side. Why? Well…stepping away from all the science of whether or not Byetta works….it’s a hard sell getting diabetics to give themselves another couple injections per day. I don’t care how small the needle is and all that. How many people do you know what to shoot themselves up a couple times a day?
Anyway, it’s late, and that’s a couple real-time examples of short ideas for biotech stocks.
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